Please read the case and answer the questions at the end. Pleaserespond to two of your peers. Do you agree or disagree? CollegiatePromotions distributes products that are marketed to students andalumni of major universities. High-selling products include coffeemugs and T-shirts that bear collegiate logos. In order todistribute its products, Collegiate Promotions has adopted anindependent sales representative model. The sales representativeswork for themselves and are not actual employees of Collegiate.They have independent contractor status. Becoming an independentsales representative is easy. An interested person pays a $300 feeto obtain catalogs and other literature needed to advertise andsell the line of products. The sales representative then begins towrite orders for products. A sales representative can sell toanyone through any channel. This means that there are no protectedterritories, so several sales representatives are often working inthe same geographic location. Many representatives also sellthrough Internet websites. Collegiate Promotions does not set anabsolute price for its products. Instead, it uses a wholesale pluspricing strategy that allows sales representatives to sell within arelatively broad range. The range is normally 30 to 50 percenthigher than wholesale. For instance, if the wholesale price of acoffee mug is $10, then the representative can choose to sell themug at a price anywhere between $13 and $15. The salesrepresentative receives a commission of half the amount chargedover the wholesale price. If the mug sells for $13, therepresentative receives $1.50. If the mug sells for $15, therepresentative receives $2.50. Because they are independentcontractors, the sales representatives receive no othercompensation. Questions: Do you think the compensation system atCollegiate Promotions is effective? Why would a salesrepresentative try to sell at the top of the price range? Why atthe bottom of the price range? Do you predict that most sales aremade at the top or bottom of the range of possible prices? How doesthe lack of geographically protected sales areas affectsalespersons' behavior? How committed do you think the independentcontractors are to Collegiate Promotions? What are some positivefeatures of the independent contractor status for the organization?What might be some positive features for the independentrepresentatives? Would you expect sales representatives to havelong-term associations with the company?
